Harrelson v. Bestaff Arcadia

Harrelson v. Bestaff Arcadia
No. 2010 CA 1647, 2011 WL 2739449
(La. App. 1 Cir. June 10, 2011)

The Louisiana Court of Appeals affirmed the decision of the workers’ compensation judge (WCJ) finding that the employer issued timely payment of the settlement agreement as same related to the employer’s payment of the MSA portion of the settlement.

In Harrelson, the parties finalized the settlement and had same approved by the WCJ prior to CMS’ approval of the proposed MSA.  Under the terms of the settlement agreement, the claimant was to be paid a lump sum amount upon approval of the settlement by the WCJ, which the employer paid accordingly. The settlement agreement also contained a contingency through which the employer could opt out of paying the MSA portion of the settlement, and keep medicals open, in the event CMS ultimately came back and required MSA funding in an amount greater than the proposed MSA figure.

Under Louisiana law, employers could be subject to penalties and attorney fees if they do not issue payment of the settlement within 30 days after it becomes due.  In this case, the employer did not tender payment of the MSA portion of the settlement until after it had received CMS’ approval of the MSA which fell beyond the 30 day statutory payment provision.

The claimant argued that the employer did not issue timely payment of the settlement and was thus entitled to penalties and attorney fees from the employer.  The employer countered that the settlement agreement contained a valid contingency clause in relation to the MSA and that it issued timely payment pursuant to that clause and in accordance with Louisiana law.  The WCJ ruled in favor of the employer and the claimant appealed to the Louisiana Court of Appeals.

For the reasons discussed more fully below, the Louisiana Court of Appeals affirmed the WCJ’s ruling. This case is summarized in greater detail as follows:    

Facts

This case involved an industrial accident which occurred in 2004 in Louisiana.  The claimant, Robb Harrelson, and the employer, Bestaff Arcadia, eventually reached a total settlement of this claim in the amount of $125,000.

Under the terms of this agreement, the claimant was to be paid $82,990 via a lump sum.  The remaining $42,010 was to be placed into a MSA account, subject to certain conditions.  At the time of the settlement, the proposed MSA had not been submitted to CMS for approval. 

The settlement agreement contained a provision (referred to by the court as a “suspensive condition” as that term is defined under Louisiana law) in which the employer, at its sole option, could withdraw the MSA amount and simply keep future medical open in the event that CMS ultimately required MSA funding in an amount greater than the proposed $42,010 figure.

On December 10, 2009, the WCJ entered an order approving the parties’ settlement agreement.  Upon approval of the settlement agreement, the employer tendered the lump sum payment of $82,990 and advised that the balance of $42,010 for the MSA would be “forwarded shortly.”

On December 27, 2009, CMS received the MSA proposal.  CMS approved the proposed MSA as submitted ($42,010) on January 27, 2010.  The employer then issued payment of the MSA amount to the claimant five days later on February 2, 2010.

A few weeks after receiving the MSA funds, the claimant filed a motion to enforce the settlement arguing that that the employer failed to pay the full amount of the settlement in a timely manner under Louisiana law.  Specifically, the claimant asserted that penalties and fees were owed since the employer did not tender the MSA portion of the settlement within 30 days of the date of the judgment approving the settlement agreement per Louisiana Revised Statutes 23:1201G.

The employer countered that the settlement agreement contained a valid suspensive condition that prevented the judgment from being enforced until CMS provided its approval.  The employer further contended that it had timely paid the MSA monies within 30 days from the date CMS approved the MSA.

The WCJ ruled in favor of the employer and denied the claimant’s claim for penalties and fees.  The claimant then appealed the matter to Louisiana’s first circuit of appeals.

Issue Presented/Court’s Ruling

On appeal, the appellate court had to determine whether the employer issued timely payment of the settlement under Louisiana law.

The main statute at issue in this dispute was Louisiana Revised Statutes 23:1201G.  The court quoted this statute, in pertinent part, as follows:

If any award payable under the terms of a final, nonappealable judgment is not paid within thirty days after it becomes due, there shall be added to such award an amount equal to twenty-four percent thereof or one hundred dollars per day together with reasonable attorney fees, for each calendar day after thirty days it remains unpaid, whichever is greater, … unless such nonpayment results from conditions over which the employer  had no control …. The total one hundred dollar per calendar day penalty provided for in this Subsection shall not exceed three thousand dollars in the aggregate.  (Emphasis added by the court).  Harrelson, 2011 WL 2739449, at *1 n. 2.

The court commenced its analysis by noting that under the terms of CMS’ MSA approval letter the MSA was not considered effective until a final copy of the executed settlement agreement, containing the approved MSA amount, was forwarded to the agency.  

The court found that CMS’ approval of the MSA was the triggering event upon which the order approving the settlement agreement became final and enforceable thereby invoking the provisions of Louisiana Revised Statutes 23:1201G. The court explained:

The approval [of the MSA] by CMS was an uncertain event that once it occurred made the WCJ’s order approving the entire settlement agreement final and enforceable. In other words, the right to enforce Bestaff’s conditional obligation to fund the MSA account contained in the settlement agreement did not arise until the fulfillment of the suspensive condition when CMS approved the MSA funding. The settlement agreement simply could not be enforced until the suspensive condition was met. (citations omitted).  Harrelson, 2011 WL 2739449, at *2.

In light thereof, the court noted that the employer in this case had tendered the MSA funds within a few days after receiving CMS’ approval, and well within 30 days of the settlement agreement’s suspensive condition (CMS’ approval). 

In addition, the court found that penalties and fees were not owed under Louisiana Revised Statutes 23:1201G since the employer’s non-payment of the MSA funds pending CMS’ approval of the MSA was the result of a condition outside of its control.  The court stated:

Additionally, we find that the timing of this uncertain event—CMS approval—was completely out of Bestaff’s control since the payment of the MSA funds was entirely dependent upon whether CMS approved the funding. The record indicates that Bestaff’s $42,010.00 proposal for funding the MSA account was received well within thirty days from the WCJ’s order approving the settlement agreement. However, CMS did not approve the request until a month later.

Furthermore, even if we assumed arguendo that the WCJ’s order approving the parties’ settlement agreement with a suspensive condition was a final and non-appealable judgment on the day it was signed by the WCJ, we conclude that penalties for nonpayment within thirty days are not owed in this instance because Bestaff’s nonpayment was the result of ‘conditions over which the employer had no control.’ See, LSA-R.S. 23:1201G.  Harrelson, 2011 WL 2739449, at *3. 

Based on the foregoing, the appellate court affirmed the ruling of the WCJ denying assessment of statutory penalties and attorney fees against the employer.

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